A Credit history report is a compilation of factual data that helps lenders to accept or reject your credit application. The credit history report does not indicate whether you are a good or a bad credit risk. It is just a tool used by lenders to ascertain your credit worthiness based on their own judgments.

Lenders invariably examine your history before extending mortgage loan, personal loan, and auto loan, issuing a credit card or any other form of credit. Employers may also ask for a credit history report to determine how financially responsible and stable the applicant is. Depending on your history and credit rating, the lender may accept or reject the application or might offer you debt at a higher interest rate. The lender does this in order to protect his investment, which is in the form of financial credit. For the lender, you are just another applicant and there is no way to determine how credits worthy you are. Even if the lender knows you through a common acquaintance, there is no way to determine if the information coming from the common source is authentic. A credit rating is instrumental in this regard from lenders point of view.

Who Compiles Credit History Report?

Before understanding what the constituents of a credit history report are, it is important to know who compiles your credit history report. Credit history reporting dates back to 1830’s. However, at that point of time anyone who paid a price had access to credit history of a person. Once the system was modernized and became regulated, only certain entities – apart from yourself – are given access to this vitally important data. Agencies that compile factual records of your financial history are called as Credit Reporting Agencies (CRA). Though there are hundreds of CRAs throughout the country, TransUnion, Experian and Equifax are the only ones which are nationally recognized.

Constituents of Credit History Report

Credit reports and credit scores are entirely different and should not be confused with each other. Your credit history report does not include your credit score. Credit bureaus calculate your credit score based on the information in a credit report. There are different versions of credit history report and the CRA issues one to the requestor depending on the purpose for which the report needs to be used. If you are requesting the credit history report for yourself, it is comprehensive and has following information –

  • Personal Information – Under this, all your personal information including name, present and previous addresses, contact information, date of birth, employment history, marital details and social security number is revealed.
  • Credit History – The most important part of your credit history report wherein all the information relating to history of bill payments to banks, credit card companies, utilities, finance companies, mortgages is included.  Your bank account details like when the account was opened, type, closure date and any pending debt history is also provided.
  • Publicly Available Records – Information such as court rulings related to bankruptcies and tax liens is provided under this section.
  • Report Inquiries – This section details how many times and by whom the copy of your credit history report was accessed.  Also, companies that can offer you credit or any other financial product are listed here.
  • Disputes – If the information included in the credit report is inaccurate, you are authorized to report it to the CRA. All such instances of dispute and detailed in this section.

    • A credit history report does not include information relating to race, ethnicity, religion, criminal records, income details and bank balances.

    CRAs have a network of affiliates which provide necessary information required to compile a credit history report. Lenders, financial institutions continually feed information relating to credit applications, rejections and payments to CRAs. Every time a credit is extended to you, the lender supplies this information to the CRA or its affiliate which is then saved centrally.

    Who Can Access Your Credit History Report

    Stipulations are laid down concisely on who can request your credit history report. The reasons for which a report can be accessed are also specified. Financial institutions, mortgage lenders, credit card companies with whom you may have initiated credit dealings are authorized to access your credit report. Employers after getting a written consent from you can also be given access to a copy of your credit report. At times, financial services companies are provided with your name and address (based on certain criterion) to offer you pre-approved financial products. They however have very limited access to the report. Any person of agency which tries to access your report under false pretenses can be fined or may be sent to jail.

    Factors Affecting Credit History

    Number of factors can affect your report in a negative way. Thus, it is recommended that every year you should request for a free copy of your credit history report from all the three major CRAs and rectify any inaccurate information. Factors that can affect your report include –

  • Applications and Inquiries – Every credit card, mortgage loan and personal loan application is recorded in the report. Thus, indiscriminate practice of applying for credit should be avoided at all costs. Request to access the credit report by lenders also gets reflected in the report. Never allow mortgage lenders or auto loan providers to access your credit report unless the negotiations have fructified. Ten inquiries in a span of six months reflect badly in your credit history report.
  • Inactive Credit Accounts – If you own multiple credit cards, ensure that you use all of them judiciously. An inactive credit card is bad for your credit history. The oldest credit card should be kept in use. The same rules are applicable for bank accounts too. Never leave a bank account inactive.
  • Missed Payments – Every missed payment towards credit card bill, mortgage, telephone, electricity, gas and water is recorded by CARs. And it continues to stay that way for at least seven long years blemishing your credit history report.
  • Hitting Credit Limits – The moment you hit the limit on your credit card or the overdraft account, CARs make a note of it.

    • All of the above mentioned factors need to be monitored regularly to keep your credit worthiness in good health. Lenders use this information to decide if credit can be given to you or not.

    What If Your Credit History Report Has Inaccuracies?

    It is entirely possible that an inaccurate piece of information has percolated in your credit report. It might be because of inaccurate information provided by a merchant or a lender. Thus, if you find something is amiss, write to the CRA explaining the inaccuracy. It is also important that you supply pertinent information and supporting documents to prove your claim. If your claims are valid, the CRA needs to make changes to the credit history report and send in a fresh copy of your amended credit report within 30 days.

    If you are about to apply for a major credit such as a mortgage loan, first obtain your report, study it for inaccuracies and request to make changes before you make the mortgage application. This will ensure that your application is approved without any hassles.